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Claims for Closing Costs for Displaced Businesses under the New Jersey Relocation Assistance Act


When government seeks to acquire property using the power of eminent domain against a property owner or tenant, or entity in possession, as the case may be, a critical issue is whether those affected by the acquisition are entitled to relocation assistance. The threshold question in such instances is whether the entity or individual is a “displaced person” under the law. N.J.S.A. 20: 4 – 3 (c)  defines “displaced  person” as:

“any person who…moves from real property, or moves his personal property from real property, as a result of the acquisition of such real a result of the written order of the acquiring agency to vacate real property, for a program or project undertaken by a taking agency…”

Under New Jersey law, separate regulations govern claims brought under a New Jersey Department of Transportation (“NJDOT”) project, and claims in projects brought by other agencies.  Relocation claims brought against other agencies are governed by N.J.A.C. 5:11-1.1 et seq.  These regulations differ materially from the regulations that govern claims in matters in which the New Jersey Department of Transportation is the taking agency.  See: N.J.A.C. 16: 6 – 1 et seq.  Adding to the complexity,  if a project involves the use of federal funds, then the relocation assistance  is governed by federal law, specifically regulations governing relocation at Title 49, sub-title A part 24.

This article examines a narrow relocation assistance issue, that is, whether a displaced business is entitled to closing costs , for claims brought against entities other than NJDOT, in other words, claims governed by  N.J.A.C. 5:11-1.1 et seq.

Payments to businesses under the foregoing regulations are set forth at N.J.A.C. 5:11-3.8 which states that:

 “(a) an eligible business that is displaced from its place of operation and moves its personal property there from shall be entitled to receive payment for:

1.  Actual reasonable moving expenses, as set forth in N.J.A.C. 5:11-3.9; actual direct loss of tangible personal property, as set forth in N.J.A.C. 5:11-3.10; actual reasonable expenses incurred in searching for a replacement business, as set forth in N.J.A.C. 5:11-3.11; actual reasonable expenses for professional fees incurred in the renovation and lease, use or acquisition of the replacement site, as set forth in N.J.A.C. 5:11-3.13;

2.  Payment of moving and related expenses, as set forth in N.J.A.C. 5:11-3.12.

            (emphasis supplied)

Closing costs would be governed by N.J.A.C. 5:11-3.8, which states that:

  1. an eligible business that is displaced from its place of operation and moves its personal property there from shall be entitled to receive payment for …  2. Legal services, including without limitation, the researching of local ordinances and preparing of documents for submission to local construction officials, planning boards and boards of adjustment.”

A while ago, our office litigated a case involving a claim for closing costs pursuant to N.J.A.C. 5: 11 – 3.8.  That case, captioned Jaloudi v. Borough of Fairview, OAL Dkt No. CAF 3751-97, Agency Dkt. No. BHICD 242-97, 16 N.J.R. 374 (1997). involved Fairview’s condemnation of our client’s property for a public library.  At the time of acquisition our client’s building was being used for clothing manufacture.  We advanced a relocation claim that included closing costs incurred in the acquisition of replacement property. Only one reported case even remotely addressed the issue: Paterson Redevelopment Agency v. Schulman, 78 N.J. 378 (1979) where the Supreme Court denied a claim under relocation assistance for a mortgage fee. Id. at 391.  The Paterson case, however, rejected the claim of closing costs.

In convincing the Administrative law Judge that our client was entitled to reimbursement in full for closing costs, wewere able to distinguish the regulations under which the  Paterson Court denied such costs. The Administrative Law Judge agreed, concluding in his decision that:

“The history of the 1984 amendments [to the law governing relocation assistance] indicate that, at least applied to this case, closing costs, mortgage fees, and other associated profession fees should be recoverable.”

The ALJ further went on to explain that:

“the summary section of the proposed amendments indicate that “the purpose of the Relocation Assistance Program was to insure that persons displaced by public acquisition of their dwellings or places of business… receive compensation that will allow them to re-establish themselves in comparable surroundings elsewhere.” 16 N.J.R. at 176 (Sub Sec 1984).

The ALJ  further noted “the purpose of the [law] is to leave the displaced business in reasonably the same position it was in before the displacement…” Foreign Auto Prep v. New Jersey Economic Development Authority, 201 NJ Super 428, 435 (App. Div. 1985).  Accordingly, the ALJ concluded that,  although not specifically provided for  in the regulations, closing costs for the purchase of new property are recoverable.

Our victory came with  an important limitation.  That is, the ALJ limited the recovery of closing costs in instances where the displaced entity owned, as opposed to leased, the property that was acquired.  In other words, such costs would not be recoverable where the displaced business leases property and then goes on to purchase a replacement site.  See Jaloudi supra, p.5.  This limitation underscores that the purpose of the regulation is to pay for costs that had previously been incurred.  In instances where the property is leased, those costs were never incurred and therefore are not recoverable.

This was an unpublished decision so you may need our help to take advantage of it.  Since closing costs are clearly reimbursable under the regulations, and reimbursement is not evident from a plain reading of the regulations or statute, there may be instances where such costs are not paid to deserving owners.

If you have any questions, please contact Blake S. Davis at

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